The case apparently most on point to the recent terrorist attacks is Pan American World Airways v. Aetna Casualty & Surety Co., 505 F.2d 989 (2d Cir. 1974) (applying New York law). In that case, a U. S. airline brought an action to recover against the insurers of its aircraft which was destroyed by terrorists. The aircraft had been hijacked over London by members of a Palestinian terrorist group and was destroyed in Egypt. The United States District Court for the Southern District of New York found the insurers to be liable for the loss under the airline's all-risk policies. The insurers appealed, but the appellate court agreed that the war-risk exclusion did not apply.

In reaching its conclusion, the court held that war is a course of hostility engaged in by entities that have at least significant attributes of sovereignty. In that case, the terrorist group, which occupied land in Jordan at the sufferance of the Jordanian government, was not a de facto government. Therefore, the destruction of the aircraft was not done by "military" power within the meaning of the war exclusion of the all-risk policies. The court in Pan American noted that even if the terrorist group was engaged in a guerilla war against Israel, such a war would not appear to be the proximate cause of the hijacking of an aircraft owned by an American carrier, since that airline serviced no routes to Israel.

The Pan American case is discussed at length in Holiday Inns, Inc. v. Aetna Insurance Co., 571 F.Supp. 1460 (S.D. N.Y. 1983). In Holiday Inns, the insured brought an action against the insurer to recover under an all-risk policy when the insured's hotel in Beirut, Lebanon was severely damaged during a period of civil unrest. The court found that the insurer failed to establish that the damage to the hotel fell within the excluded perils of insurrection or civil war. Although the damage to the hotel occurred during a period of civil unrest, coverage for "civil commotion" was specifically included in the policy by endorsement. Despite the fact that journalists and politicians had invariably referred to the events in Lebanon at the time as a "civil war," the court noted that its task was "to give the words at issue the insurance meaning; and to place the burden of proof in accordance with law." Id. at 1502. As in the Pan American case, the court in Holiday Inns applied the insurance doctrine of "contra proferentem." Under that doctrine, "experienced all-risk insurers must expect 'the exclusions drafted by them to be construed narrowly against them.'" Id. at 1463 (quoting Pan American, supra, at 1003-1104).

In a few more recent cases, carriers have been successful in seeking to rely on the war exclusion. Yet, a discussion of those cases should make it clear why they are likely to be limited to their facts. For instance, in Younis Brothers & Co. v. Cigna Worldwide Insurance Co., 99 F.Supp. 1385 (E.D. Penn. 1995), aff'd., 91 F.3d 13 (3d Cir. Pa. 1996), the insured sued their carrier in connection with the loss of its property during an insurrection in Liberia. The District Court concluded, and the Court of Appeals agreed, that the excluded insurrection was the cause of the insured's fire and looting losses to their property and business. In that case, however, the evidence indicated that the leaders of the armed movements had stated an intention to overthrow the existing government. Indeed, the president had been captured and killed before a cease fire agreement was signed. Moreover, although it was not discussed, the policy at issue included a more expansive form of the "acts of war" exclusion, which specifically referenced "acts of terrorism." Id. at 1391.

Similarly, in TRT/FTC Communications, Inc. v. Insurance Co. of the State of Pennsylvania, Inc., 847 F.Supp. 28 (D. Del. 1993), the court held that the theft loss suffered by a merchant was properly denied under the war exclusion in an all-risk policy. The loss in that case occurred in the context of a military conflict between the United States and the Republic of Panama. Regardless of whether the men who stole the insured's equipment were part of the Panamanian forces or a band of looters, the court held that there was ample evidence to support the conclusion that their actions against the merchant were enabled by the military hostilities occurring between Panama and the United States. Moreover, in that case, there was no question that a "war" had been declared and that the conflict involved sovereign nations.

Another case, arising out of the same conflict between the United States and Panama, is Sherwin-Williams Company v. Insurance Co. of the State of Pennsylvania, 863 F.Supp. 542 (N.D. Ohio 1994), aff'd. and rev. in part, 105 F.3d 258 (6th Cir. 1997). In that case, the court also found that the war exclusion applied, but that a special endorsement covering "civil commotion" permitted recovery by the insured. The court quoted from the war-risk exclusion, which contained an expansive provision relating to "acts of terrorism." That exclusion applied to:

Acts of terrorism committed by a person or persons acting on behalf of or in connection with any organization. For the purpose of this condition, Aterrorism" means the use of violence for political ends and includes any use of violence for the purpose of putting the public or any section of the public in fear. Id. at 544.

The court did not discuss that "acts of terrorism" exclusion since it had already determined that the looting and vandalism was covered by the special endorsement relating to civil commotions.

The cases discussed above generally contain a review of the larger body of case law concerning the applicability of the standard form war exclusion. Those cases tend to focus on two main factors. The first is whether there was internal strife in the form of an insurrection, rebellion, revolution or civil war. In that event, there must have been an actual attempt to overthrow the government. Alternatively, the second factor concerns whether there was a conflict between either sovereign nations or de facto governments. Neither situation would appear to apply with respect to the recent terrorist attacks against the United States. Therefore, the subject attacks should be covered under standard form policies, which do not specifically exclude terrorist acts.

President Bush has announced that the prime suspect in the attacks is Osama bin Laden, the leader of the al-Qaeda terrorist organization. Osama bin Laden was formerly a citizen of Saudia Arabia, and his terrorist organization is believed to exist in some 60 countries. He has supported and is apparently now being protected by the Taliban. The Taliban is an insurgent Islamic fundamentalist faction currently in control of the government of Afghanistan. Although he and his organization are certainly hostile to the United States, bin Laden's attack appears to have been more generally aimed at our western culture and the values and ideals symbolized by our free society. The attack does not appear to have been an attempt to overthrow our government. The death toll from the attack on the World Trade Center includes people from over 60 countries. The attack had the obvious purpose and effect of striking at the heart of the free world, which is a reason why such a large coalition of nations is backing the United States in our efforts to bring bin Laden to justice.